Who pays for organic products?

Date:

28 May 2018

Author:

Jenny van Doorn and Peter Verhoef

Jenny van Doorn is Associate Professor at the Faculty of Economics and Business at the University of Groningen, and Peter Verhoef is a professor and Director of the University of Groningen Business School

Organic food production has become an increasingly salient issue. Retailers are increasingly focusing on organic products, and former US President Barack Obama funded a $50 million scheme to help farmers transition to organic methods. This reflects an increasing sense of urgency in finding ways to produce food for the world’s population that are sustainable, and minimise damage to soil and ecosystems.

A vital question lies behind this issue: why do some consumers make the organic choice, while others do not? We studied this theme in two recent papers, published in the International Journal of Research in Marketing and Journal of Retailing. We examined why customers choose to pay for organic products over cheaper alternatives, and the barriers to organic purchase behaviour.

Our study in the Journal of Retailing uses scanner datathat track actual purchase behavior in 28 product categories and sought to examine the interplay between supply-side factors and consumer characteristics in the purchasing of organic food. The supply side issues include factors such as the freshness and ease of availability. The consumer characteristics that we studied are consumer values, psychographic attitudes, and sociodemographic factors. We conducted two surveys: a household level survey of consumer characteristics and an expert survey to collect data on supply side factors.

So, who pays for organic products? We found that people who buy organic food are more concerned about the environment or animal welfare. The consumers of organic products are less sensitive to price and supply fluctuations: they would buy organic even when the price was high, and the availability was low. We examined several sociodemographic factors, including gender, age, income and household size. We found that women, older people and those with a higher income were all more likely to buy organic food, whereas those with a larger household size were less likely to do so.

Furthermore, we find that organic products are more popular in fresh versus processed categories and less popular in so-called vice compared to virtue categories. A vice product is one which provides an immediate pleasurable experience but has detrimental long-term effects, such as a chocolate bar which is tasty but may lead to weight gain. A virtue product is one which is less immediately gratifying but provides more positive long-term effects, such as oatmeal which might be less tasty but is healthier.

Our International Journal of Research in Marketing paper sheds more light on the low popularity of organic products in vice categories using a different research method, namely experiments. We find that in vice categories, organic claims lead to lower quality evaluations on the side of the consumer. These lower quality perceptions translate to consumers being less willing to purchase organic in these categories.

Though sales of organic product have substantially grown but market share of these products are still low. In our research, we highlight some of the consumer and supply side factors that affects the market for such products. Further study is vital to understand the drivers of ethical choices in retail.